Learn About Multi Family Home in Philadelphia

What is a Multi Family Home in Philadelphia?

If you found yourself on this page, you may be looking to purchase a multi family home in Philadelphia. Understanding multi-family properties can be a considerable advantage when investing in single-family homes. In Philadelphia, there are zoning codes that separate properties across the city. The most common multi family code is RM1. You may also see CMX2 and CMX 2.5 as common multi-unit zonings. But those are Commercial mixed-used buildings. You have to have commercial space on the first floor, and then you can have apartments above the storefront.

You can always find this zoning when you look for an address on the Philly OPA property search site. That is a good way to tell if the home is zoned correctly. Sometimes, single-family homes using codes RSA 5 can be converted into multi-unit buildings through a variance process. A multi-family property is any property with more than one unit, such as a duplex, triplex, or quadplex. Those are the three most common multi family homes you will find in Philadelphia. Those three would be a good place to start if you want to invest in the multi family homes.

How to Find Multi Family Homes for Sale

There are a few different ways to find multi family homes for sale. You can use an off-market company, such as a wholesaler, usually an individual company that contracts a home and sells it for an assignment fee. However, the best way is to contact a local real estate agent familiar with Philadelphia’s multi-unit properties. Once you get your agent, you want to get pre-approved through a lender. Whether it’s a hard money loan or a mortgage, once you have your pre-approval. You and your agent have a great idea of your price range and area you can now search.

There are specifics you want to look for when buying multi family homes. First, you want to ensure that if you take out a mortgage, your monthly payments will be less than what you bring each month. It’s always good to ensure that you make enough that if one unit goes empty, you can still make a monthly profit or at least break even. You also want to consider whether the property would be delivered vacant. Sometimes, an excellent-paying tenant might rent there for a while, which might make more sense to keep.

Purchasing a Multi Family Property

You also want to see if there is an opportunity to fix up the place with light cosmetics and see if you can increase the rental income. Sometimes, you might come across an owner who has not done much work on the property and is willing to let it go for less money. You can then buy it, do a facelift on the property, and increase your rent.

Another factor you want to consider is a cap rate, the percentage of the purchase price you make back every year. Most of the time, you will buy these rental properties in turn-key condition (rental-ready for a tenant). It could be a good investment if you can find a property with a cap rate of 8% or more. You get a cap rate by determining how much the property makes per year minus expenses. Then, divide that number by your offer price or the asking price. That would give you your cap rate.

Benefits of Owning a Multi Family Home

Owning a multi family home has many benefits, especially versus a single-family residence.

The first one is that I have seen many times where a multi-family home may be side by side with a single-family home. Both are the same square feet. However, the multi-family home brings in more monthly money than the single-family property. Generating passive income from multi-family homes is the most enormous benefit.
The second benefit of owning a multi family home is if you have one unit empty after a tenant moves out. You will still have other tenants in the home paying rent. Opposed to if you just have a single-family home and your tenant moves out, you have no income coming in until it gets rented out again.
Better appreciation for value is a massive benefit of multi-unit buildings. Suppose you have two homes in the same area with similar square footage. Your home will likely be worth more than that same size home on your street.
Overall, there are tax benefits associated with owning a multi family home in Philly. Multi-unit property owners can subtract maintenance costs, insurance, and property management fees from their yearly net income.

How to Sell a Multi-Family House in Philadelphia

The best way to sell a multi-family home and earn the most money is by contacting a realtor. The reason is that they can list the property and gain maximum exposure for you. You are going to want to keep a few things in mind. For example, if I do work, will it raise my value? Also, will it sell better vacant or with tenants in place? You can make it as long as the property is in the best condition.

Additionally, if you want to ensure tenants are in place, you are getting close to market rent. The more income the property produces, the more you can ask for. After you talk with a real estate agent, you can better understand the best things to do to get the most money when it comes time to sell.

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